Parramatta
is located 23kms to the west of the Sydney CBD on the banks of a Parramatta
River. As Australia’s oldest inland settlement Parramatta has always played a
significant role in the NSW economy. In recent decades the suburb has
flourished as a commercial precinct. In fact Parramatta is now the 6th
largest central business district in the county and is regarded as the economic
epicentre of greater Sydney.[1]

Parramatta
is a major transport hub having reaped the benefits of upgrades to the Railway
Station and the construction of a new bus interchange. It is also linked to the
Sydney CBD by ferry with the River Cat providing a pleasant journey between the
two centres.Parramatta’s connectivity to the rest of
Sydney is set to improve further with multi-billion dollar developments such as
the North West Rail and WestConnex in the State Government pipeline.[2]Since 2000
Parramatta’s office market has benefitted from relocation of a number of
Government agencies including NSW Police Headquarters and Sydney Water. At the
same time, financial services firms have arrived in droves and the area now
hosts an estimated 20% of Australia’s Top 500 companies[3]
Commonwealth Bank, Deloittes and KPMG along with engineering giant GHD are
among Parramatta’s corporate A-list.The legal
profession too has a strong presence in Parramatta. The western end of the CBD
is referred to as the Justice Precinct. It is home to a number of institutions
like the Federal Magistrates Court, the Family
Court of Australia, NSW Attorney General and the Legal Aid Commission[4].
Commercial
real estate in Parramatta is tightly held and its office market is one of the
best performing in Sydney. As at June 2015 the head line vacancy rate was 7.4%
with the A-Grade category close to fully occupied at 2.4%[5]
Colliers believe that the figure has reduced further since then with a number
of deals being finalised in early FY16.[6]Leasing an
office in Parramatta is a difficult task at the moment. Supply is extremely
limited. Larger vacancies (over 2,000 sqm) are practically non-existent and no
new space is scheduled for release until the 4th quarter of 2016.[7]
Availability is currently restricted to smaller tenancies spread throughout a
number of buildings.[8]

The supply
squeeze caused rents to leap by as much as 5% over the past financial year.
According to Savills net face rents now typically fall within the following
range.A Grade: $380
to $460 per square meter per annumSecondary
Grade: $280 to $360 per square meter
per annum[9]

Parramatta
is poised to undergo further transformation with the planned $2b redevelopment
of Parramatta Square. The Parramatta Council has ambitions to turn its
municipality into a true alternative to the Sydney CBD.As part of
the project, the Council recently closed a $1.2b deal with Walker Corp to
construct three sky- scrapers - specifically a 68 storey residential tower and
two 53 storey commercial buildings comprised mainly of A-grade stock[10].
Colliers estimate that the new towers will add around 140,000 sqm of office
floor space to the market.[11]Walker Corp
chairman Lang Walker describes the project as “great
opportunity to secure major government tenants and private sector tenants, some
of which have already expressed interest in securing office space at Parramatta
Square.”[12]Given the
buoyant market fundamentals, it is not surprising that Parramatta is attracting
significant investor attention. According to Colliers $500m flooded into
Parramatta during FY15 with major players like Centuria, Eureka, VennCapp Real
Estate and GDI Property becoming stakeholders in the area. [13]Most
analysts expect that Parramatta’s robust development pipeline will be matched
with ongoing tenant demand. Parramatta offers facilities and amenities to rival
the Sydney CBD without the premium price tag. In addition residential rezoning
in other suburban business districts like Epping, Burwood, Ashfield and St
Leonards could result in Parramatta being viewed by businesses as a cost
effective alternative.[14]

Investing in
commercial real estate in Parramatta is a great strategy for prospective
tenants and land lords alike.